AFRICAN AMERICANS AND SOCIAL SECURITY: A PRIMER - WILHELMINA A. LEIGH, PH.D. JOINT CENTER FOR POLITICAL AND ECONOMIC STUDIES FEBRUARY 2011
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African Americans and Social Security: A Primer Wilhelmina A. Leigh, Ph.D. Joint Center for Political and Economic Studies February 2011
African Americans and Social Security: A Primer Wilhelmina A. Leigh, Ph.D. Joint Center for Political and Economic Studies February 2011
The Joint Center gratefully acknowledges the support of AARP in helping to make this publication possible. Opinions expressed in Joint Center publications are those of the authors and do not necessarily reflect the views of the officers representing the Board of Governors of the Joint Center or the organizations supporting the Joint Center and its research. Joint Center for Political and Economic Studies, Washington, DC 20005 www.jointcenter.org © 2011 by AARP. Reprinted with the permission of AARP. All rights reserved. Published 2011. Printed in the United States.
Foreword Social Security—formally the Old Age, Survivors and Disability Insurance (OASDI) program—is an integral part of the nation’s social safety net. In the event of disability, death or retirement, Social Security benefits are available to a worker and/or to the worker’s dependents. Social Security benefits are often the only source of income for African Americans, especially for retirees. For two of every five African American retiree households age 65 or older, Social Security benefits are the only source of support. Although many African Americans depend on Social Security benefits to meet their basic needs, the value of the program to this group is often debated and sometimes misrepresented or discounted. At a time when the nation is seeking to put its financial house in order, approaches also are being considered to reform Social Security to guarantee its solvency and sustainability into the future. The Joint Center for Political and Economic Studies, with support from AARP, prepared this primer to spell out the facts about how the disability, survivor and retirement programs under OASDI serve African Americans. I would like to thank Dr. Wilhelmina A. Leigh of the Joint Center for developing this primer as a resource for audiences throughout the nation when Social Security reform is debated over the coming months. We at the Joint Center look forward to engaging in these deliberations to ensure that the Social Security system remains an unfrayed part of our social safety net and continues to help meet the needs of American workers and their dependents. Ralph B. Everett President and CEO Joint Center for Political and Economic Studies d African Americans and Social Security: A Primer
From a youth with a disabled father, to a widowed Payroll taxes of 6.2 percent on up to $106,800 (2010)
mother with minor children, to a retiree age 80, African of earnings are levied on both employers and employees
Americans value and depend on the Social Security system to support the Social Security system. (Self-employed
and its benefits. During public discourse about the need workers pay both shares of the payroll tax.) To qualify for
to reform or modify the current system, however, the value Social Security retirement benefits, a worker has to earn a
of Social Security to black Americans is often debated and total of 40 credits in the system.3 One credit is earned for
sometimes misrepresented or discounted. For example, each $1,120 (2010) of earnings, up to the maximum of
some erroneously believe that because of their shorter four credits per year. Benefits are calculated by applying
life expectancy, African Americans do not benefit from a progressive formula to the lifetime earnings of covered
the Social Security system. This primer provides facts workers. Under this formula, low-wage lifetime earners
and figures to illuminate the many ways black Americans receive a larger proportion of lifetime earnings as monthly
participate in and benefit from Social Security. benefits, than do high-wage workers.
• Social Security benefits are the only source of Retirement benefits are available to eligible workers
income for two of every five African American beginning at age 62 (early retirement age). However,
retiree households age 65 or older receiving claiming benefits any time before full retirement age
benefits.1 (currently 66) results in a permanent reduction in
monthly benefits; delaying claiming benefits until after
• More than a third of African Americans expect full retirement age (up until age 70) results in a permanent
Social Security to be their major source of retirement increase in monthly benefits. Social Security is a pay-
income. as-you-go system under which the taxes collected in a
• One of every five children (nearly 21 percent) who given year are used to make payments to beneficiaries
receive Social Security disability benefits is African that same year. The pay-as-you-go balance of the system
American, although they are only 15 percent of all is expected to worsen within the coming 75 years due to
children in the United States. sociodemographic factors, such as the aging of the Baby
Boom cohort,4 declining birth rates,5 and lengthening
life expectancies.6 If no changes are made to the system,
The Social Security system provides insurance Social Security is projected to be able to pay full benefits
against the loss of income due to death, disability and until 2037 and approximately 75 percent of benefits after
retirement. that. Reforms to avert insolvency for the Social Security
system are being considered publicly, often in concert with
Social Security—formally the Old Age, Survivors and discussions about reducing the federal budget deficit.
Disability Insurance (OASDI) program—is a social
insurance program established in 1935 to provide benefits
to workers and to their families in the event of death,
disability or retirement. As of December 2008, nearly 51
million Americans, including more than 5 million African 3 Disabled workers and survivors of deceased workers can become eligible for benefits with fewer
than 40 quarters of coverage. The number of credits needed to be eligible for these benefits depends
Americans, received benefits from the OASDI program. on the age the worker died or became disabled and the type of benefit.
4 The Baby Boom cohort, born between 1946 and 1964, is one of the biggest in our nation’s
Benefits for workers in covered employment2 and their history. In the near future its members will tap into the Social Security system in record numbers as
retirees.
dependents are paid for by taxes on the wages of individual
5 Birth rates for blacks and whites in the U.S. have declined since 1990. Low birth rates translate
workers (Federal Insurance Contributions Act, or FICA, into fewer workers whose payroll taxes will support an increasing number of beneficiaries.
taxes) and on the earnings of the self-employed (Self- 6 Longer life expectancies increase the number of years over which benefits will be paid to the
average beneficiary. Although life expectancies are increasing among the U.S. population overall,
Employment Contributions Act, or SECA, taxes). notable differences persist among racial/ethnic subgroups. Some groups such as African Americans
have lower life expectancy, while others such as Japanese Americans have higher life expectancy. In
addition, as a result of increasing inequality in life expectancy by income over the past three decades,
1 Retiree households age 65 or older—formally known as beneficiary units—are households
on average, workers in the lower half of the wage distribution can expect to receive fewer years of
that include Social Security beneficiaries, who may be either married couples (at least one of whose
retirement benefits than their counterparts in the upper half of the wage distribution. See D. Baker,
members is 65 or older) or non-married individuals age 65 or older.
D. Rosnick, The Impact of Income Distribution on the Length of Retirement Center for Economic
2 Two of the biggest groups of workers excluded from covered employment are state and local and Policy Research Issue Brief, October 2010, at http://www.cepr.net/documents/publications/ss-
government employees covered by public retirement systems and Federal workers hired before 1984. 2010-10.pdf (accessed 29 October 2010).
Joint Center for Political and Economic Studies 1Social Security is a major source of income for a deceased worker, as dependents of a disabled worker, or as
African Americans. dependents of a retired worker.
Social Security benefits constitute a large share of income for • More than five percent of all black children but only
African American retiree households 65 years or older receiving three percent of all white children receive Social Security
benefits,7—72 percent of income on average among this group.8 benefits of any type.12
For 28 percent of black married couples 65 years or older, Social
• Children constitute a larger proportion of black Social
Security benefits provide 90 percent or more of income. Social
Security beneficiaries (11.8 percent) than they do of
Security payments provide 90 percent or more of income for
white beneficiaries (4.3 percent).13
54 percent of unmarried African Americans age 65 or older. In
addition, Social Security benefits are the only source of income • Nearly one of every five (19.5 percent) children who
for two of every five (40 percent of ) African American retiree receive Social Security benefits is African American,
households age 65 or older.9 (See Figure 1.) although African Americans are only 15 percent of all
U.S. children.14
Thus, the responses from African American adults (ages 18
and over), when queried about their expected major source of • One of every five children (nearly 21 percent) who
retirement income, are not surprising. In both 1998 and 2009, receive Social Security disability benefits is African
African Americans were more likely than whites to respond that American, although they are only 15 percent of all
Social Security was their expected major source of retirement children in the United States.15
income. In 1998, more than a third of black respondents (35
percent)—compared to half as many white respondents (17 • The proportion of children out of all black survivor
percent)—indicated that they expected Social Security to be beneficiaries (49 percent) is more than double the
their major source of retirement income. In 2009, a comparable proportion of children among all white survivor
share of African Americans (36.6 percent), and more than beneficiaries (23 percent).16
a fourth of whites (26.5 percent) had this expectation.10
Importantly, if future retirees are as reliant on Social Security
as current retirees, many African Americans may significantly
underestimate the importance of Social Security to their future
retirement security. (See Figure 2.)
12 Joint Center tabulation based on data from Social Security Administration, Annual Statistical
Supplement 2009 Table 5.A.1, at http://www.ssa.gov/policy/docs/statcomps/supplement/2009/
African American children are more likely than white supplement09.pdf (accessed 27 October 2010) and from U.S. Census Bureau, Population Division,
June 2010, Table 4. Annual Estimates of the White Alone Resident Population by Sex and Age for the
children to receive Social Security benefits. United States: April 1, 2000 to July 1, 2009 (NC-EST2009-04-WA) and Table 4. Annual Estimates of
the Black or African American Alone Resident Population by Sex and Age for the United States: April 1,
2000 to July 1, 2009 (NC-EST2009-04-BA), at http://www.census.gov/popest/national/asrh/NC-
African American children11 are more likely than white children EST2009-asrh.html (accessed 29 October 2010).
to receive Social Security benefits of all types—as survivors of 13 Social Security Administration, Annual Statistical Supplement 2009 Table 5.A.1 and Table
5.A.1.4, at http://www.ssa.gov/policy/docs/statcomps/supplement/2009/supplement09.pdf
(accessed 27 October 2010).
14 Joint Center tabulation based on data from Social Security Administration, Annual Statistical
7 See footnote 1 for the definition of retiree households 65 years or older receiving benefits. Supplement 2009 Table 5.A1.4, at http://www.ssa.gov/policy/docs/statcomps/supplement/2009/
supplement09.pdf (accessed 27 October 2010) and from U.S. Census Bureau, Population Division,
8 Social Security Administration, Income of the Population 55 or Older, 2008 SSA Publication
June 2010, Table 4. Annual Estimates of the White Alone Resident Population by Sex and Age for the
No. 13-11871, Table 9.A3, April 2010, at http://www.ssa.gov/policy/docs/statcomps/income_
United States: April 1, 2000 to July 1, 2009 (NC-EST2009-04-WA) and Table 4. Annual Estimates of
pop55/2008/incpop08.pdf (accessed 27 October 2010).
the Black or African American Alone Resident Population by Sex and Age for the United States: April 1,
9 Social Security Administration, Income of the Population 55 or Older, 2008 SSA Publication 2000 to July 1, 2009 (NC-EST2009-04-BA), at http://www.census.gov/popest/national/asrh/NC-
No. 13-11871, Table 9.A3, April 2010, at http://www.ssa.gov/policy/docs/statcomps/income_ EST2009-asrh.html (accessed 29 October 2010).
pop55/2008/incpop08.pdf (accessed 27 October 2010).
15 Joint Center tabulation based on data from Social Security Administration, Annual Statistical
10 W.A. Leigh and A.L. Wheatley, Retirement Savings Behavior and Expectations of African Supplement 2009 Table 5.A1.4, at http://www.ssa.gov/policy/docs/statcomps/supplement/2009/
Americans: 1998 and 2009 January 2010, at http://www.jointcenter.org (accessed 27 October supplement09.pdf (accessed 27 October 2010) and from U.S. Census Bureau, Population Division,
2010). June 2010, Table 4. Annual Estimates of the Black or African American Alone Resident Population by
Sex and Age for the United States: April 1, 2000 to July 1, 2009 (NC-EST2009-04-BA), at http://
11 In the calculations throughout this primer, the numbers used for children are for persons under
www.census.gov/popest/national/asrh/NC-EST2009-asrh.html (accessed 29 October 2010).
age 18 only. When determining benefit eligibility, however, the Social Security Administration
(SSA) uses a broader definition of children. In addition to youth under age 18, the SSA counts as 16 Social Security Administration, Annual Statistical Supplement 2009 Table 5.A1, at http://
children students ages 18 and 19 as well as disabled adult children. Disabled adult children are www.ssa.gov/policy/docs/statcomps/supplement/2009/supplement09.pdf (accessed 27 October
adults who are considered as children because their disability occurred during childhood. 2010).
2 African Americans and Social Security: A PrimerFigure 1: Social Security as Percent of Income for African American Retiree
Households Ages 65 or Older That Are Receiving Benefits, 2008
More than 50% 71.0
More than 90% 47.2
100% 39.5
Source: Social Security Administration, Income of the Population 55 or Older, 2008, Table 9.A3, at http://www.ssa.gov
Figure 2: Social Security as Expected Major Source of Retirement Income, 1998 and 2009
(Percent)
40
36.6
35.0
35
30
26.5
25
20
17.1
15
10
5
0
Black White Black White
1998 2009
Source: Retirement Savings Behavior and Expectations of African Americans: 1998 and 2009 (January 2010),
at http://www.jointcenter.org.
Joint Center for Political and Economic Studies 3Figure 3: Beneficiary Type by Race, 2008 (Percent)
100
15
90
31
80 11
Disability Benefits
70
Survivor Benefits
60 13 Retirement Benefits
50
40 74
30
55
20
10
0
African Americans Whites
Source: Social Security Administration, Annual Statistical Supplement 2009, Table 5.A1, at http://www.ssa.gov
African Americans are more likely than white than white workers who are disability beneficiaries are of the
Americans to receive survivor benefits and disability working age white population (2.7 percent).18
benefits.
Among Social Security beneficiaries, African Americans are African Americans get back more from Social Security.
more likely than whites to receive both survivor benefits and
disability benefits. Because African Americans are more likely An analysis by the U.S. General Accounting Office19 found
than whites to work in hazardous jobs,17 the relative frequency that compared to white Americans, African Americans receive
with which black workers receive disability benefits and with from Social Security a higher rate of return—defined as the
which their spouses and children receive disability and survivor relationship between benefits received and taxes paid into the
benefits is greater than for white workers. More than one of system. Differences in the rates of return were due primarily to
every eight (13 percent) black Americans who receive Social differences between the groups in lifetime earnings, and in the
Security benefits gets survivor benefits, in contrast to about one incidence of disability and of death. Lifetime earnings are the
of every 10 white Americans (11 percent). The comparison for basis for calculating Social Security payments, using a formula
disabled beneficiaries is more striking, with African American that replaces a larger proportion of pre-retirement covered
Social Security beneficiaries (31 percent) more than twice as earnings for low-income earners than for high-income earners.
likely as white recipients (15 percent) to receive these benefits. African Americans are more likely than white Americans to
(See Figure 3.) In addition, black workers who are Social
Security disability beneficiaries are a larger proportion of the
working age (18 or older) black population (4.4 percent)
18 See footnote 12 for sources.
19 The U.S. General Accounting Office is now the U.S. Government Accountability Office. See
17 D. Loomis and M. Schulz. “Mortality from six work-related cancers among African Americans United States General Accounting Office, Social Security and Minorities: Earnings, Disability
and Latinos,” Am J Ind Med 2000 38(5): 565-75 and D. Loomis and D. Richardson, “Race and the Incidence, and Mortality Are Key Factors That Influence Taxes Paid and Benefits Received GAO-03-
risk of fatal injury at work,” Am J Public Health 1998; 88:40-44. 387, April 2003, at http://www.gao.gov/new.items/d03387.pdf (accessed 27 October 2010).
4 African Americans and Social Security: A PrimerFigure 4: Life Expectancy from Birth, by Race and Gender, 1950-1990 (Years)
79.4
80
78.1
75.6
75 74.1
73.6
Black Males
72.2 72.5
Black Females
72.7
70 White Males
68.3 70.7
67.4
White Females
66.5
68.0
65 66.3
64.5
63.8
62.9
60 61.1
60.0
59.1
55
1950 1960 1970 1980 1990
Source: National Center for Health Statistics, Health, United States, 2009: With Special Feature on Medical Technology, Table 24,
at http://www.cdc.gov/nchs/data/hus/hus09.pdf
be lifetime low-wage earners20 and to thereby receive a greater part, the shorter life expectancy of African Americans.22 In
return from taxes paid into the system over their working addition, black beneficiaries on average receive smaller monthly
lifetime. In addition, black Americans are disproportionately retirement benefit payments than do whites. In 2008, the
likely to be disabled,21 a fact that also increases their return from average monthly Social Security retirement benefit received by
the Social Security program. Disabled individuals generally African American men was $1,109.30; for African American
begin to receive benefits at younger ages and often receive these women it was $945.50. The average monthly retirement
benefits for a greater number of years than do retirees. benefit for white men was $1,333.80; for white women it was
$1,014.50.23 These different average benefit payments primarily
reflect differences in total lifetime earnings.24
African American beneficiaries are less likely than
whites to receive Social Security retirement benefits. African American beneficiaries are less likely than whites to
receive retirement benefits, in part, because they are less likely
Nearly three of every four white beneficiaries (74 percent), to live long enough to become beneficiaries at age 62 (the
but about half of black beneficiaries (55 percent), receive early retirement eligibility age) or older. For example, black
Social Security retirement benefits. (See Figure 3.) This Americans born in 1950 (age 60 in 2010) have a life expectancy
difference reflects not only the greater likelihood that African from birth of 60.8 years. The life expectancy for these black
Americans receive disability and survivor benefits but also, in males is 59.1 years; for these black females, it is 62.9 years.
20 The low-income labor force (persons in the labor force for 27 weeks or more who earned
22 National Center for Health Statistics, Health, United States, 2009, Table 24, January 2010, at
poverty-level wages) is disproportionately African American (21.4 percent), when compared to the
http://www.cdc.gov/nchs/data/hus/hus09.pdf (accessed 27 October 2010).
U.S. population overall (12.8 percent African American). See U.S. Department of Labor, U.S. Bureau
of Labor Statistics, A Profile of the Working Poor, 2007 Report 1012, March 2009, at http://www.bls. 23 Social Security Administration, Annual Statistical Supplement 2009 Table 5.A.6, at http://
gov/cps/cpswp2007.pdf (accessed 29 October 2010). www.ssa.gov/policy/docs/statcomps/supplement/2009/supplement09.pdf (accessed 27 October
2010).
21 African American workers are disproportionately more likely to be disabled—12.3 percent
of the U.S. population but 17 percent of disabled workers. See Social Security Administration, 24 The low total lifetime Social Security-covered earnings of African Americans are the result
Fact Sheet: Social Security is Important to African Americans, June 2010, at http://www.ssa.gov/ of a variety of factors, including lower wages earned and greater time not in the labor force due to
pressoffice/factsheets/africanamer.htm (accessed 28 October 2010). unemployment, health problems, or disability.
Joint Center for Political and Economic Studies 5The life expectancies from birth for their white counterparts, however, are significantly greater-- 69.1 years for both sexes combined, 66.5 years for males, and 72.2 years for females. (See Figure 4.) Proposals to reform the system by increasing the full retirement age are likely to further reduce the already low levels of Social Security retirement income that African Americans receive. Because of their higher concentration in more physically- demanding jobs, a larger proportion of African Americans may be unable to work longer and will claim retirement benefits early. Thus, an increase in the full retirement age may result in a larger reduction of monthly Social Security benefits for African Americans than for those who can and will work longer before retiring. Conclusion African Americans benefit significantly from the Social Security program—as retirees, as disabled workers or their dependents, and as survivors of deceased workers. Although black Americans are more likely than white Americans to receive disability and survivor benefits and less likely to receive retirement benefits, their return from taxes paid into the Social Security system exceeds that of whites. In addition, older African Americans are more reliant on Social Security benefits than other groups. Thus, conversations about modifying the Social Security system must include voices of African Americans and other racial/ethnic subpopulations whose dependence on the system is great but whose patterns of usage may differ from the norm. 6 African Americans and Social Security: A Primer
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